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Want to gain an edge in the ever-changing Crypto Assets market? Understanding the relationship between volume and price is crucial. Here are five practical trading rules that can help you better grasp market trends:
1. Rapid rise followed by slow decline: This may indicate that large funds are quietly accumulating. If the price rises rapidly and then shows a slow decline with limited drop, it is likely that big players are quietly accumulating at lower levels. The key is to observe the changes in trading volume.
2. Weak rebound after a sharp decline: This is often a dangerous sell signal. If the price struggles to rebound after a crash and is difficult to rise, it is likely that large funds are gradually offloading at high levels. At this point, one should be wary of a larger-scale decline risk.
3. The Importance of High Trading Volume: A large trading volume at a high level does not necessarily mean an immediate crash; it may be the result of intense confrontation between bulls and bears, and the market still has the potential for an upward movement (but with higher risks). However, if there is a decrease in volume while prices are rising at a high level, it often indicates exhaustion of buying power, serving as a clear exit signal.
4. Interpretation of Bottom Trading Volume: A single increase in bottom trading volume is insufficient to confirm a reversal; it may be a false signal or a continuation pattern. However, if the bottom trading volume continues to increase and prices stabilize, it may indicate substantial capital entering the market, and one might consider gradually building a position.
5. The relationship between emotions and trading volume: Short-term price fluctuations are often influenced by market sentiment, while trading volume reflects the strength of market consensus. High trading volume may accelerate the existing trend (whether up or down), while shrinking trading volume indicates a lack of clear direction or insufficient attention in the market, making it difficult to form a strong trend.
In trading decisions, one should not only focus on price movements but also analyze market sentiment and changes in trading volume together. Avoid blindly following the trend; establishing your own judgment system is the key to success. Remember, in the Crypto Assets market, rational analysis and risk control are always the foundation of success.